The yield on Treasury bills has hit 11 percent for the first time in more than a decade amid tightened liquidity situation in the financial sector of Bangladesh, central bank figures showed.

Yesterday, the government borrowed Tk 5,141 crore through the auction of Treasury bills of three tenures (91-day, 182-day and 364-day) at interest rates ranging from 10.80 percent to 11.2 percent.

The yield on Treasury bills for the 364-day instrument stood at 11.20 percent and the government borrowed Tk 422 crore through its auction.

"The yield rate is rising because of the central bank's efforts aimed at containing inflation," said the treasury head of a private bank.

The spike in the rate of Treasury bills means that the interest rate on loans will increase since the former is used to determine the rate of the latter. As a result, borrowing could be costlier.

In June, the Bangladesh Bank lifted the cap on lending rate of banks and introduced the Six Months Moving Average Rate of Treasury bills (SMART) as a benchmark as part of its move to gradually allow the market to determine the interest rate.

The yield on Treasury bills, which crossed 10 percent last month, has been rising steadily since April.